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Age of robots

By Shermine Gotfredsen, General Manager, APAC, Universal Robots

Japanese SoftBank group chairman Masayoshi Son predicted in June this year that robots would outnumber humans in 30 years. There is an undeniable public fascination with robots that are able to imitate humans and perform work tasks. Manufacturing sectors are equally delighted by their capabilities, snapping them up by the bulk. According to the International Federation of Robotics, more than 200,000 industrial robots were sold worldwide in 2014. The demand for industrial robots will continue growing 12% on average per year from 2015 to 2017.[1]

Choosing to invest

Big companies with long production lines are not the only ones that can leverage on robotic technology. The modern industrial robot, now sporting a small frame and footprint, also appeals to small and medium enterprises (SMEs). However, the initial investment outlay for SMEs is significant. The decision to adopt a new technology often hinges on either of these financial metrics: Payback period or Return of Investment (ROI).

Payback period is expressed in years, and represents the time it takes for the amount invested in the asset to be repaid by the net cash outflow generated by the asset. There are many disadvantages of weighing investment risks this way. Namely, the metric does not take into account the future gains beyond the break-even period. This means that the long-term value of industrial robots is not reflected.

ROI is usually expressed as a percentage, calculating the net profit of the investment relative to the costs involved. “Most manufacturing companies have traditional means of calculating ROI and they’re based on direct labor savings and short-term benefits. But

the real benefit of robotics is not on the short term,” remarked Ron Potter, Director of Robotics Technology for Factory Automation Systems, Inc.[2]

Three points to consider

There are indirect savings and benefits involved that may not be reflected in ROI or payback period figures. It is important to take them into account when deciding to adopt robots. These include employment-related expenses, production stability and time for recruitment and training.

Industrial robots, being automated machines, can run 24/7 with the lights out after workers have knocked off for the day. Apart from the routine inspection and maintenance of the robots, employee benefits such as sickness leave or health insurance are not applicable to them. These employment-related expenses can be seen as savings that the company accumulates when using robots.

Also, production stability is what a factory will likely experience when fitted with robots. Industrial robots are able to ensure consistent, high quality product output with its precise movements, preventing any wastage of materials. This is especially important for production lines that require high accuracy or are small but very costly.

Time equates to money in a manufacturing company. Where robots are concerned, time is saved as the usual recruitment process is no longer necessary and they can be quickly set up for production. This can help offset the time needed to employ factory workers with the inevitable staff turnover.

Source of new jobs

The popularity of industrial robots across Asia not only means safer working environments for workers but also creates jobs. A 2013 report by Metra Martech has shown that industrial robots are forecast to create between 900,000 to 1.5 million jobs from 2012 to 2016.[3] For example, there are industries where only industrial robots can provide consistent, quality output at an affordable cost – like the leisure equipment business.

The highly competitive landscape of electronic products like phones and tablets drives prices down, putting pressure on manufacturers to cut costs. Using robots in production lines allows for manufacturers to keep their products competitively priced. This indirectly helps to create downstream activity and jobs to support the retail side for example.

Thinking ahead

With the growing adoption of industrial robots by factories worldwide, it has become increasingly important for manufacturers in SMEs to consider investing in the technology to stay on the same footing. The metrics used to assess investment efficiency often do not reflect the whole picture, especially for robots that have long-term value. Manufacturers need to look beyond the initial investment costs and considering savings in terms of time and materials.